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TREASURIES-U.S. yields mostly little changed as Brexit, Europe in focus

Gertrude Chavez-Dreyfuss

NEW YORK, Jan 15 (Reuters) - U.S. Treasury yields were mostly little changed in choppy trading on Tuesday amid negative external factors such as weak European data and concerns relating to a vote on a deal involving Britain's exit from the European Union. U.S. 30-year bond yields, however, continued to climb, hitting a four-week high. Data on U.S. producer prices for December was softer-than-expected, sliding by the most in two years due to declines in the costs of energy products and trade services. The report didn't have a major impact on Treasuries, analysts said. "The issue is not with the United States. We had weaker-than expected U.S. data, but not terribly so," said Stan Shipley, fixed income strategist, at Evercore ISI in New York. "We have all these global factors: Brexit, Europe is weakening and questions on China as it is increasingly taking stimulative actions. And so Treasuries are the flight to safety here," he added. U.S. Treasury yields moved in line with those on euro zone government bonds, which hovered near recent six-month lows on Tuesday as the German statistics office said the country had escaped a recession but still recorded its slowest growth in half a decade in 2018. "Germany barely posted growth in Q4 and it doesn't look good in Q1. Things are looking poor there," Shipley said. Investors were also worried about Brexit, with British Prime Minister Theresa May facing the prospect of a historic defeat in a vote on her Brexit deal in parliament on Tuesday. May's expected defeat leaves open a range of outcomes, from resurrecting her deal, leaving the EU with no deal at all or holding another referendum that could halt Brexit altogether.

In late morning trading, U.S. 10-year note yields were slightly up at 2.713 percent, from 2.71 percent late on Monday. But 10-year yields have been mostly lower all day. Evercore's Shipley doesn't see much upside in U.S. 10-year Treasury prices and he expects yields to rise from current levels. "I don't think we can rally a great deal here," Shipley said. "Based on inflation expectations, the 10s look like a low 3-handle here. Yields are not really going to tumble here unless the risk of a U.S. recession climbs higher." U.S. 30-year bond yields, however, rose to 3.071 percent , from 3.06 percent on Monday. Thirty-year yields climbed to as high as 3.077 percent, a four-week peak. On the short end of the curve, U.S. 2-year yields were down on the day at 2.532 percent, compared with Monday's 2.535 percent.

January 15 Tuesday 10:52 AM New York / 1552 GMT

Price Current NetYield % Change


Three-month bills 2.405 2.4535 0.007Six-month bills 2.455 2.5205 0.000Two-year note 99-240/256 2.5326 -0.002Three-year note 99-248/256 2.5109 -0.003Five-year note 100-116/256 2.527 -0.002Seven-year note 100-36/256 2.6027 0.00410-year note 103-136/256 2.713 0.00330-year bond 105-216/256 3.0742 0.014


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 16.25 0.50


U.S. 3-year dollar swap 12.50 0.25


U.S. 5-year dollar swap 9.00 0.25


U.S. 10-year dollar swap 2.50 0.25


U.S. 30-year dollar swap -21.00 -0.25


(Reporting by Gertrude Chavez-Dreyfuss)